This example explains an ASC 840/IAS 17 operating lease for a 10-year office rental, with $5,000 monthly rent for the first five years and $6,000 for the next five. Since the lease term is less than 75% of the building’s 20-year life and fair value is not determinable, it is classified as operating. Rent is straight-lined per FTB 85-3, creating a deferred liability to match expense and payment differences. Monthly entries reflect $5,500 rent expense, with cash and deferred liability adjustments. EZLease automates classification, calculations, and compliance setup for such leases.

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